With 75% of the homes in Maricopa at least 10 years old, it is imperative for homebuyers to budget for unexpected home repair costs.
When air conditioning units or appliances fail suddenly, the cost of repair or replacement can be a shock. Think about the rest of the home. The water heater may be nearing the end of its life span or the cooling system may date to 2005. And who knows what your roof looks like under the tiles.
A home warranty plan is an important part of buying a home. While home insurance can cover you against structural damage and theft, a home warranty can repair or replace systems and appliances that stop working due to normal wear and tear.
The “1% Rule” recommends that homeowners budget 1% of the purchase price of their home for annual maintenance. For a $325,000 home, that’s $3,250 a year.
According to US News and Freddie Mac, however, homebuyers will spend as much as 4% of the property’s value on annual maintenance and repair costs. For the same $325,000 home, that could be $13,000 annually.
The estimated average yearly cost of maintaining a home in Arizona is $16,097, according to a recent survey by Porch.com.
Another recent study found a quarter of homeowners could not afford to make a $1,000 repair.
The many homes in Maricopa built from 2004-2006 during the boom are now 15 years old. Mechanical systems are aging, and appliances have a certain life expectancy. They will fail — someday.
The list of recommended home maintenance is long and includes draining the hot water heater, changing out HVAC filters, oiling your garage door rollers, cleaning the dryer vent duct and damper or servicing the evaporative cooler of your AC system.
But not many homeowners keep up the maintenance of their home as well as they maintain their car.
A good home warranty plan may help offset these unexpected costs. When agreeing to buy a home, the buyers have to state in the purchase contract whether they want a home warranty and who will pay for it. Just know that in today’s seller’s market, that cost will almost always be borne by the buyer. Sellers don’t need to offer that incentive in such a hot market.
What does a home warranty cover?
Plans vary, and it depends how much you want to pay. The average plan costs between $300-$600 in annual premiums and covers:
• Garbage disposal
• Water heaters
• Electrical systems
• Inside plumbing
• Ceiling fans
• Upgrade options
• Spa/Pool systems
• Garage door openers
What is not typically covered?
• Outdoor items/systems
• Faucet repairs
• Pre-existing conditions
• Code violations
• Improper installation
Typically, when something does break or wear out, you can call your home warranty representative first, and they will send over a repair professional in their network. Some companies let you pick your own repair company.
Often, homeowners will pay a service fee, between $75-$125 typically, for that in-home visit.
Always examine the inclusions and exclusions of a home warranty carefully and discuss it with your agent before signing. There are many stories about claims being denied, with insurers claiming a repair is necessary because of a pre-existing condition, which is not covered.
Arizonans would be wise to delve into the coverage specifics of individual home warranties for HVAC systems, and use that as a basis for your decision.
Dayv Morgan is a Maricopa Realtor and owner of HomeSmart Success.
This column appears in the April issue of InMaricopa magazine.